I was older than 59 1/2 when I took the distribution. The annuity was fully annuitized and no surrender charge was imposed by the insurance company. The withholding allowance I chose for the distribution was 10%.
If I'm not mistaken with annuities, a 10% penalty applies to the earnings portion of the withdrawal.
I'm not sure whether the IRS would assess a penalty on the earnings because they assume that earnings are withdrawn first (and not the original investment).
I don't know if the IRS can penalize the earnings portion over the 8 years to be fully annuitized by withdrawing the entire amount. It had a Rider with a guaranteed minimum withdrawal benefit (GMWB), but I never received a single payout.
I file yearly. The entire amount of the annuity withdrawn plunged me into a higher tax bracket. Hence the reason for tax owed when filing this year instead of a tax refund.
After realizing the mistake of not withholding a higher amount last year when I started working on my taxes, this is begging the question now whether the IRS would assess a penalty and or/ taxes.
The program didn't draw any flags when I finished, but I'd like to avoid making another mistake by double checking to be absolutely certain since annuities are such a complex investment.
